They say you shouldn’t let the tax tail wag the investment dog, but I would beg to differ in the, er, dog days of the £12300 CGT allowance. It’s probably more important in future as this allowance drops to £3k in a couple of years. Why is this?
First, if you are using your ISA, as I am, then no worries in that particular area. If you aren’t, then Monevator would like to know why the bloody hell not? Only hold investements in an ISA on pension? Stand at ease, as you were.
However, I have concluded that as I can live off my pension then it’s a little bit mad to retain the three years equivalent salary in cash-like savings that was there to prevent me becoming a forced seller into a down market when I was living off savings and then SIPP income with some earnings. The emergency didn’t come, and in Covid that savings crept up to about 5 years, what with spending less, earning a little more. Along with some luck and Covid shorting, so I have unwrapped holdings in a GIA as well as wrapped ISA holdings. It is the holdings in the GIA that exercise me here.
I decided to give the gold holdings the order of the boot from the ISA, gradually selling them in the ISA, buying some equities in there with the proceeds, mainly VWRL, but at the same time as I sold gold in the ISA I bought that much and a little more in the GIA with some of the cash savings. Gold has had a decent run of late, sufficient that I sold all my SGLP to crystallise about 6k in CGT, to buy SGLN. Slightly over 30 days later I look at the SGLN and observe there’s another 5k in capital gain up for grabs, so I flog that and buy SGLP back. I also collected a profit of £2.7k in BP, which I have decided to get out of now, and find I have gone somewhat OTT on capital gains for this year. Never mind, I am prepared to eat a £500 loss in SMT and a £1k loss on LGEN. LGEN is softened by the £500 dividend paid, but I did time it wrong, never mind. The trend towards a tax free dividend allowance of £500 shows that having a GIA containing dividend payers is not such a good idea in future, but that’s another story.
I liquidated a few minor gains1 to get as close to the £12300 CGT for this year but just under. Obviously I get to eat the spread in the turn, I am not so sure I can get so excited about the £5 dealing fee in a seven figure total, but the turn is about 10 to 20 pips, and may be wider on actually doing it rather than a soft quote, which is getting on for at least 200 sods, so you don’t want to spin this wheel too often. OTOH the putative CGT saved is 10% of £12300, which is worth getting out of bed for.
Now assuming that the banks really are strong and resilient as they keep telling us, despite SVB, First Republic, Credit Suissethen it’ll all come good. Probably will come good in a couple of years either way. In that scenario I expect that gold to tank, compared to my last purchase price and go down, by about 10k, less some sort of inflation, as equities increase. But in that case, the embodied capital loss is then able to be offset against any gains, so selling it and rebuying now gives me optionality in future. The gold is there as diversification, I don’t want to off it, so the recent gain is purely notional. What the market giveth with one hand, it taketh away with t’other in its own good time. Of course if I knew that ZIRP was going to return again and money would be there for free I would maybe hold off, but you never know. One day the GFC will have to be paid for…
There’s an asymmetry with capital gains, in that losses can be rolled forward for future use, but gains have to be used in the year. This year’s gain was particularly valuable, because it’s more than it will be in future – 6k next year, three after that. A GIA will be much less valuable in future – in a typical scenario of 7% average annual returns (assuming inflation of 2% as it used to be, hahahaha) a £12300 allowance lets you hold £175k before running into CGT on average. In the end scenario of £3k you get to hold about 42k before running into CGT. And, of course, inflation is 10%, though they all say that isn’t going to carry on. We shall see about that.
I will naturally use the £20k ISA allowance coming up, and perhaps the one after that if it’s on offer. After that, well, who knows.
Britain is a poor society with some very rich people in it.
It’s hard to see Keir Starmer weeping too many salty tears about capitalist running-dogs like FI/RE sorts, because as that fellow from the FT said, Britain is a poor society with some very rich people in it. The Atlantic summed it up better in How the UK became One of the poorest Countries in Western Europe
Britain chose finance over industry, austerity over investment, and a closed economy over openness to the world.
There’s a Panorama programme on how the accident happened, although they stop short of asking why it happened 2
the BBC’s Analysis Editor Ros Atkins asks why so many people are feeling so poor.
A: it’s because they are poor, seems to be the conclusion.
And if you think this view is a particularly a lefty wonkery worldview then let’s hear it from the Torygraph – Britain is a poor country pretending to be rich. In particular that fellow wants a word in the shell-like of all you workshy middle aged FI/RE shirkers. So that’ll learn ya.
We have actually seen this movie before, well, those of us of advanced years have. When was that? Way back when, in the early 1970s my German grandmother cam to visit us in London. She was gobsmacked by the number of old bangers on the road then, you could almost see the thought bubble “But I though Britain won the war, what’s up with that”.
I think that sentiment was voiced over a bottle of wine that she had brought with her. Seriously, the 1970s were a terrible time Britain for quality in wine as well as cars, the stuff people drank was revolting. Even Blue Nun is probably better now. My grandmother wouldn’t have tolerated that in the house, never mind brought it over with her own fair hand.
Wonder what else happened around that time, when Britain was known as the sick man of Europe. Ah well, correlation is not causation, so that’s all right then. Like with the banks. Move along now. Nothing to see here at all. Britain is rich enough to laugh off a 4% hit in GDP as a mere trifle.
In particular, since ISAs are a key tool to enable the under 50’s to speed up their retirement then I wonder what the direction of travel will be in a few years’ time?
In the meantime use it or lose it – both your ISA allowance and should you be so fortunate as to have the need and the capability, your CGT allowance!
- I was hoping to have enough GIA investment income to defray the increase in power bill but the Buzzard has shat on this idea somewhat with the upcoming £500 tax-free limit on dividends. Though if you are going to pay tax on income dividend income beats earning it or indeed pension income, as dividends are taxed at 8.75% for the lower orders. I was more generally so wrong with that post in its anticipated effect on me :( ↩
- It seems to be regarded infra dig for the current government to find the BBC asking ‘how did the government fuck this [insert specific aspect of British life] up.’, although asking that specific question used to be the point of the fourth Estate. ↩
53 thoughts on “Don’t let the tax tail wag the investment dog, well, ok, maybe this once…”
Yes, having skimmed over the highlights of the spring budget, I had the exact same thought about the ISAs. The allowance might be going soon, after all, it’s of no use to the proper rich, all it does is help a few middle aged lazy sods retire early. Good news about the pension annual allowance though, should save me a few K in tax over the next couple of years, before it gets slashed again by the next government.
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They probably won’t can it enirely, but reduce the limit. Although I have managed one way or another to fill mine ever since 2009 it’s not easy for many people, and indeed the real value of the ISA allowance was a lot lower in the early days – the Bank of England inflation calculator tells me the £7200 allowance I started on is the equivalent of £10,500 today.
Well done on the AA, as you say, fill yer boots while it’s there!
Nice moves re the CGT; hope it all plays out along the lines you hope for.
Also, agree totally about ISA’s.
Not much has been made of this, but buried in the details of the budget is a hint that the ISA allowance from 24/25 will increase by cpi, see e.g. chatter at: https://the7circles.uk/budget-march-2023/
– maybe a case of every little helps!
The OBR inflation forecast published alongside the budget made interesting reading – but, of course, it is just a forecast.
Am I to take it you have seen nothing of any interest to you in this budget re pension changes?
And lastly, yes I well remember the 70’s and the movie does seem familiar, albeit with a different cast of villains and victims and revised invective – so possibly a remake. IMO few remakes have been better than the original!
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> Am I to take it you have seen nothing of any interest to you in this budget re pension changes?
The increase in MPAA to 10k might be interesting if I wanted to earn more, but I don’t really have plans to work again. Though only of limited interest, since I am a BR taxpayer anyway the uplift value of pension savings is only 6% or so due to the 25% tax-free component. I also make myself a hostage to fortune if they start levying NI on pension income, get a 20% uplift going in and eat a 32% tax coming out, less the 6%, err, no thanks. I will probably pull out my entire residual SIPP and pay the BR tax on it before that nice Mr Keir Starmer gets in just in case that happens. I need to check when I make this years £2880 contribution what the capital is in case I need to spread it out over two tax years.
> The OBR inflation forecast published alongside the budget made interesting reading – but, of course, it is just a forecast.
Yeah, RPI 13% and CPI 10%, and headed in the wrong direction from that forecast.
Todays inflation figures from the ONS are indeed somewhat contradictory to the OBR forecast; but there is a degree of mathematical certainty/inevitability in the OBR’s logic. Time will tell.
FWIW, I agree with your pensions assessment – but have a residual concern that I may have overlooked something in the weeds. This is only really a concern because I am just about to finalise my DB options.
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> This is only really a concern because I am just about to finalise my DB options.
The main gotcha which got me, is that once you draw your DB pension you are (probably) a taxpayer for life, if your DB pension is over the personal allowance. That’s a very serious disincentive to work, because a fifth of everything you earn goes down the toilet.
People with a SIPP can simply switch it off if they start work again. Sure, it needs only the tiniest violin as there are so many problems you just don’t have with a DB pension, but you want to be pretty sure you are done with work, or don’t mind the loss 20% on everything you earn.
In the end that just did my nut in. It’s irrational as hell, in one case i renegotiated an uplift of half the tax after realising that issue. I probably could have swung the lot. It’s irrational, it’s loss aversion writ large, and TBH if I think about it I’d rather have a Britain that worked properly and perhaps eat the loss. But it doesn’t feel that way, and it got under my fur. There is of course, the other issue, as you get older your expected number of days drops, and arguably that raises the value of your time relative to burning them up at work. I’m not saying it’s pretty, and I’m not saying it’s right, but paying the ratty amounts of tax on the part-time earnings on a WFH job after the end of my working life made steam come out my ears in a way that paying far far more on PAYE didn’t during my working life. I am absolutely not saying the 20% is unreasonable, but it feels that way when you also get the work to declare it through SA.
You’re probably all round a more rational fellow, so that may not be an issue for you. And it all depends on how close you are to NRA for the DB scheme, I was quite close to the NRA which Jeremy Hunt probably thinks was shockingly low, it’s still a while till I get my SP. Certainly if you have a SIPP and if there’s any chance of you working then burn up the SIPP first, because it gives you that sort of optionality.
I will be drawing my DB a few years early to the nominal NRA.
I say nominal as I actually have multiple batches of service with different NRA’s. When I start the DB it will be late to one NRA but early against two NRA’s.
A whole variety of factors and circumstances have led me to conclude that now is the correct time.
Some of these we have discussed previously e.g. revaluation vs indexation, fiscal drag and the spectre of possibly paying HR tax in due course, the [possibly erstwhile] LTA, etc. However, probably the most important thing is I have learnt that a) having ‘enough’ is more important than maximising everything and b) I have now got a much better handle on what constitutes ‘enough’.
Sure I will have some actuarial reductions to swallow, but in the round they seem about fair.
Much more surprisingly, the commutation rates on offer are the best I have ever seen and have improved so much that I have decided to take a relatively small PCLS too. I will not be investing this, but earmarking it for an inevitable downstream purchase. Sure the scheme will probably win on a gross basis, but I will probably edge it after tax at BR.
I have already all but flattened my DC/SIPP and plan to have completed this before my SP kicks in and whilst going now will cost me more in tax [to do the flattening] than I had ideally hoped it is not the end of the world. I have done over six years without any form of regular income and I do not see me leaping back into the world of work again. I did turn down a few unsolicited offers of well paid work during that period too.
Some other recent developments make the attractions of a regular (albeit taxed) pay cheque all but irresistible.
My position re HR tax is probably not entirely dissimilar to your dislike of BR tax.
Sure, shit could happen – but it was always thus I guess.
Lastly, I am pretty comfortable with my decision and I would like to thank you for some extremely helpful discussions over the last few years on this and other related matters.
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Presumably the lifted MPAA can help with HRT, in the same way as salary sacrifice was my friend with that back in the day. But it’s all details –
> the most important thing is I have learnt that a) having ‘enough’ is more important than maximising everything and b) I have now got a much better handle on what constitutes ‘enough’.
Kurt Vonnegut said it well, eh?
Sometimes I wonder if Joe Heller knew the true secret of FI/RE. Sure, I have spent more of the last 10 years that I probably should have obsessing on the details, but slowly the picture build up out of the noise. Beyond a certain level it’s not about the money, it’s about knowing thyself. It’s a tough fight, that one, IMO, because all through the first half of life you are trained to value achievement, bigger, faster, more. The along come Carl Jung with
How much? is the way of the first half, is it enough? that of the second 😉
> Presumably the lifted MPAA can help with HRT, …
Maybe in some scenarios – but the tax differential (tax rate ultimately paid vs tax rate deferred) is what really matters, not just delaying some taxation. OOI, did you manage to flatten your DC at 0%?
It occurred to me this weekend that the budget action [re the MPAA] only returned me (and I assume you too) to the MPAA position I was in when I pulled the plug six plus years ago – with no allowance for inflation in the interim. So that (non-action) along with the promise of a ‘midlife MoT’ and the possibility of a ‘returnship’ (I ask you) are unlikely IMO to persuade anyone over 50 who has jumped ship and flexibly accessed their pension to return to work. All in all, a bit of a joke really for folks like us. He may have more success in keeping people aged 50+ that are still working from leaving work early – but even there I suspect the jury is still out.
> OOI, did you manage to flatten your DC at 0%?
Yeah, all but the last 6k, because I needed the liquidity to buy a house, carrying old and new. So I sucked up tax on the last 6k. Took a fair old while, though. Some ended up in the ISA and some to top up the paltry amounts I was earning, efter the saved cash ran down. I had to hoof some of the redundancy pay into the AVCs to avoid getting taxed on that, too.
I was idly wondering if there were opportunities in the returnship thing to learn somethign really off the wall. Like how to oxyacetylene weld properly – it always looked like birdshit when I did it. But I figure firstly that I am probably too crabby to learn anythng in a formal setting ever again, and secondly, I can damn well afford to pay for it if I wanted to, and get it right for me. So that’s a no then 😉
> Yeah, all but the last 6k, ..
Well done you.
IIRC your AVC’s were salary sacrificed, so your overall differential must be impressive.
My base DC contributions were salary sacrificed but my AVC’s got only tax relief [at source].
I understand that some folks even got back some/all of the employer NIC’s too.
Have you ever calculated your overall differential on your DC/AVC’s?
> Took a fair old while, though.
Yup I know that scenario. Once it began to look likely that I might start my DB earlier than initially planned I chose to ‘speed up’ emptying my DC via a GIA. Speeding up the emptying process like that reduces the tax efficiency. The Hunt GIA changes may add some more to the tax burden too – but so be it.
Another thing that only relatively recently occurred to me is that salary sacrificed pension contributions can be up to a three ways winner, as follows:
1) you get more money in your DC pension;
2) which can be further increased if the employer also pays in [some/all] of the employer NI savings (not mandatory); and
3) you pay less NI for the same state pension
@Al Cam Your point 3) is clearly the case now, but when I was first able to salary sacrifice, in around 2013 I recall, S2P was still in place. So I had to balance NI savings then against lost pension in the future. I did the sums and it always seemed a good deal, but something to be considered. As I ended up with a protected pension, the the need to consider the trade off was not negated by the 2016 changes.
I believe, S2P had a maximum accruals per annum – which progressively reduced over time until it was effectively removed by the 2016 changes that introduced the new state pension (NSP). The vestige of S2P (and its forebears, collectively known as additional pension (AP) I think) was then built into the starting value for your NSP and if your value exceeded the maximum NSP the balance was called an additional protected payment IIRC. For the vast majority of people, the NSP is a flat rate scheme calculated with reference to the maximum for 35 qualifying years.
People speculating about about the SP becoming means tested always rather puzzles me. I say this as the [N]SP for anyone paying class 1 (category A) NI is already means tested, in the sense that the more means you have the more you pay for the same pension unless you make significant pension contributions by salary sacrifice. My point 3) above.
For info, salary sacrifice (in various forms) has apparently been around for some time, see e.g. https://www.fleetevolution.com/salary-sacrifice-not-dead-but-evolving/#:~:text=Salary%20Sacrifice%20first%20came%20about,with%20us%20since%20the%201970s.
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@Al Cam There was indeed an Upper Accrual Point (UAP), which I believe was originally set at about the same as the threshold for paying HRT. Then at some point it was frozen at £40040 even though the HRT threshold, and Upper Earnings Limit (UEL) for full-rate NI, did back then continue to increase. As you imply, this did tend to minimise the reduction in S2P from my using salary sacrifice. However, as one of the motivations for making increased pension contributions, was to get below the HRT threshold, and I did not want to be continously modifying my percentage pension contribution, the salary sacrifice effect on my S2P – now protected payment – was not zero.
Incidentally, although my employer only made salary sacrifice available in around 2013, I was then able to salary sacrifice the whole (by-then DC) pension contribution, including the AVC component above the employer match.
> IIRC your AVC’s were salary sacrificed, so your overall differential must be impressive.
Yeah, I never paid HR tax since discovering that, and looking at my NI record for the years I hadn’t jumped to that is eyewatering, compared to the £140 p.a. Class II, not quite two orders of magnitude but definitely a waste 😉 I never profited from the employer NI but busting the ass of my own was good. Obvs the tax saving was more than the NI saving, but somehow the NI grated more. I probably need to think about mu measly SIPP because I don’t ever want to pay HRT again, well, unless I become one of the Returned in a big way, which is hard to imagine at the mo.
> 3) you pay less NI for the same state pension
That was part of the reason to drive my salary down through the BRT band towards the NMW threshold. Sure, 41% margin untaxed is great, but the 32% untaxed in the BRT band ain’t such a slouch either. The problem, of course, is that you need to either live like a celibate monk in a brothel because you are embedded in with spendy co-workers, or need to have very serious savings to make up the gap. Now if I could fire up the time machine in the garage and slip back to my younger self a bung from my eventual good fortune and whisper in his shell-like “chin up, I am the Ghost of your Future Self, and I come bearing some fur with burnished tips and some gold, because you won’t be able to cash these funny plastic banknotes back in your day. FFS don’t save it, use it to smooth the path of living off NMW. It worked out all right in the long run” then I’d do it. ‘Twas ever thus, eh?
@David & @ermine:
you both did well to get reliefs at 42% and 32%; I got 42% for my baseline contributions and then 40% and 20% for my AVC’s. But it still looks like it will work out fine.
I estimate I will finally flatten my DC at around 10%. However, converting these percentages to £’s produces some interesting numbers; namely the total reliefs received are only slightly more than the tax paid (in nominals) to flatten the DC; primarily this is because HMRC gets the tax take on not just my contributions, but the employers contributions and the returns of the pot too. Getting that part of my Pot away from the taxman (for ever hopefully) was clearly a good idea; and IMO my figures also illustrate the one-sided way HMG chooses to explain the apparent cost of pensions tax relief, ie they only ever talk about the tax deferred and not the tax take down-stream!!
BTW, I never understood why conventional wisdom was to just eradicate the HRT element.
> and looking at my NI record for the years I hadn’t jumped to that is eyewatering
yup, it sure is
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To be fair I should point out that the £ note figures in my previous comment totally ignore the reliefs received by my former employer.
> then 40% and 20% for my AVC’s
Presumably freestanding AVCs? ISTR this was an option at one stage as well, but I never could see the point
> However, converting these percentages to £’s produces some interesting numbers; namely the total reliefs received are only slightly more than the tax paid (in nominals) to flatten the DC; primarily this is because HMRC gets the tax take on not just my contributions, but the employers contributions and the returns of the pot too.
I’ve never computed this, though since I only paid tax on that last 6k it was a good deal to me. I never felt that sore about missing out on the employer’s NI because I never got to see that anyway, sure it would have been nice. I suppose I should add £500 to the £1200 tax because that was the cost of the IFA advice I had to get to tick the box, but even then I can’t say it makes steam come out of my ears 😉
Interesting idea that there is an issue of HMRC getting the extra tax on the uplift from investment gains. I only have about 10k left in my SIPP but I am tending towards grounding it over a couple of years, paying the BRT tax and spending it on the GIA. And perhaps lobster and travel. Now with the changes to the capital gains tax threshold tending towards zero that is a problem, but the tax is currently at 10% so game theory says I should extract as much of my SIPP ASAP up to the HRT threshold and stick it in the GIA to pay 10% capgains on any uplift rather than 20% income tax on the uplift (less the discount due to the 25% tax free part). I would have missed that issue, thanks for the heads up!
I have now modelled this and this is not the case. I postulated putting in £3600 gross, and looking at the case where this doubled in value (ie a capgain of £3600). Accepting this is unrealistic in a few years, but it will increase the visibility.
As a basic rate taxpayer, taking this out as cash ASAP I take my £900 TFLS and pay £540 tax on the residual, taking home a total of £3060, a win of £180 for my trouble. I double my money and pay a further 10% CGT f £306, result £5814 in my pocket
Leaving the £3600 invested, it doubles to £7200. My TFLS is £1800, so I pay 20% tax on the balance of £5400, which is £1080.
I therefore walk away with £7200-1080, which is £6120.
This leads me to believe that, provided I think I can get the lot out under the HRT threshold before a Labour government, I should leave the SIPP invested, despite the fact you correctly indicate the HMRC get tax on the returns of the pot too.
Did you intentionally omit the annual cgt allowance?
> Did you intentionally omit the annual cgt allowance?
Yes, because I have the suspicion the GIA will use up that dwindling resource 😦
For the same reason I ignored the personal allowance, because I am already over that.
OK, you know your situation.
One further thought:
Once your SP turns on, will you still have sufficient headroom to HRT given that:
a) it is frozen (usually at 50270) until 6 April 2028;
b) your DB will increase by RPI (usually c. 1% > cpi) each year until then; and
c) SP could by then be c. 12.33k (using OBR cpi inflation forecast and a double lock with a 2.5% minimum)
FWIW, paying HRT on a SIPP drawdown is a total no no in my book.
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> Once your SP turns on, will you still have sufficient headroom to HRT given that:
It’s still a way off, I can ground this SIPP ahead of that. The SIPP is only ~13k next year, and having just computed that cash-wise I only get a win of £180 pa I am not sure I CBA to carry it for much longer, its work is largely done. Because it’s so small the difference in outcomes isn’t worth the bother, but for most people it would be more, and advantage retaining the SIPP.
As I see it, absent any third party contributions (such as from an employer) the SIPP is only advantageous as long as you pay a lower tax rate on the way out than you did on the way in. The tax free portion helps with this calculus, but the (currently frozen) tax band edge effects complicate matters. Also, as a pensioner once you have breached HR tax band there is no easy way back without legislation changes – which could of course happen. Subtle, situational and a pain in the ….
For info, by my calcs (using a set of assumptions like those outlined above) as long as your gross pension is <£27k today you should be fine. However, if inflation remains stubbornly high for the foreseeable, then that 'safe' pension figure becomes smaller.
My plan is to flatten my GIA and the remnants of my DC by no later than SP age. If nothing else I want to reduce the overhead of looking after all this stuff. Time will tell.
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PS have you seen this from todays Telegraph:
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> My plan is to flatten my GIA and the remnants of my DC by no later than SP age.
Sounds like you have a higher balance of DB and DC/SIPP pension than I have, which bizarrely gives be slightly more options in a weird sort of way. OTOH I have never drawn down from my ISA and I have no chance of flattening my GIA by SP age. Well, unless that nice Keir raises the ISA limit by a good handful 😉 I was fortunate in being able to run out my AVCs -> SIPP over nearly a decade, where I was earning relatively paltry amounts.
> you seen this from todays Telegraph:
I feel terrible. Not
What’s never really acknowledged is the demographic change. This is the tail end of the Baby Boomer generation rattling their way out of the workforce. Apparently the last were born in 1964 and for most of their working lives professional jobs were predicated on a NRA of 60, so elementary arithmetic tells us that all this crew will expect to be out of white-collar employment by next year at the latest.
If you look at the UK population pyramid there’s a peak of people 70 in 1998, implying that Brits shagged like jack-rabbits in 1948, although the biggest numerical lump (in 1998) is people who were 33. In five years time the ONS simulation has largely killed the babes of ’48 off. If you eyeball the peak for the UK the jack-rabbiting was relatively short-lived – looking at the rebased to 1998 peak and extrapolating the tail to 48 year olds I’d say it was all over bar the shouting by 1950. Even at an NRA of 67 this crew were out of the workforce by 2017
It was a surprise to me to read this profile of the cohort. It’s possible the authors have an agenda, but I was surprised to see the poor health – getting on for half of these folk of nominal working age (<65) have a long-standing illness or disability, although perhaps more shocking is that this applies to a third of Britons as a whole!
In some ways this is to be celebrated. These old gits are collecting their clocks and making space for GenX and the Millennials to move into their posts and earn more. 'Tis the cycle of life
> which bizarrely gives be slightly more options in a weird sort of way
Yup, due primarily to frozen tax bands once my DB starts the value drawable from my DC at BR reduces each year until my SP starts. I have just about enough parked in my GIA (from over-drawing (vs the ISA annual allowance, after tax) from the DC in previous years) to make each such necessarily reduced future DC drawdown up to the annual ISA allowance. Thus, my GIA and DC should flatten together over the next few years. A bit of a faff to orchestrate but doable I think.
The CGT changes amount to paying an extra £630 in tax next year, and £930 extra in the year after, if I have gains higher than £12,300 in those years. It’s annoying, but it may be less than the increased cost of higher energy costs, grocery bills, or council tax, or a lot less than the total cost of living increase.
I intend to use the CGT allowance of £12,300 by the end of this tax year as I shift assets from my trading accounts to my ISA’s at the start of the new tax year. I may sell also to raise more cash for spending.
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‘Presumably the lifted MPAA can help with HRT, in the same way as salary sacrifice was my friend with that back in the day.’
Yes, I was thinking of this option in later years as Im likely to be just over the basic rate band once I get my state pension. My idea was to contribute enough to ensure I didnt pay higher rate tax and then leave the pension pot (IHT free hopefully!) for my children who (if I died after age 75) under current rules would pay tax on the funds at their marginal rate. At least I think that’s how it works! (I’ve not exceeded the LTA.) Happy for experts to correct me if Im wrong. All depends on future pension changes, of course – who knows what the government will do next!
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I mean just over the higher rate band!
Thanks for the reminder. I need to re-check my CGT allowance used this year from doing some Bed & ISA some months ago. My next Bed&ISA might actually be an overnighter for a change as this years ISA allowance is used up.
The question to figure out from Google is whether the GIA sale for reminding CGT counts as being in the current tax year the day I execute the sell order or the day funds clear into my account. The several days taken for the sell order to “settle” being something I’ve always found a bit bizarre…like the sediment settling in disturbed bottle conditioned craft beer before you can drink it!
Gah! “remaining CGT” – are these comments editable?
I had an interesting bottle of said type of beer yesterday at lunchtime (Montecassino dubbel), see:
This was a complete first for me, as I have never even heard of a dark beer from Italy.
Did you earlier Bed & ISA go smoothly?
Was it by any chance with iWEB?
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> Was it by any chance with iWEB?
I can’t see anything in iWeb’s Ts and Cs that indicate a specific bed and ISA feature (f’rinstance one where you only pay one spread/fees), though of course you can always do it selling and then transferring the cash in and buying. Have I missed something?
I haven’t tried any of those Italian beers, looks interesting! I’m working through an assorted box some friends sent for Christmas which arrived late. I read the labels and some say “bottle conditioned” but I’ve shaken it up by then so it has to be left for the sediment to settle! The box came from here: https://www.beersofeurope.co.uk/
>> Did you earlier Bed & ISA go smoothly?
The previous Bed & ISA was manual / “self service” selling in HL and AJB accounts then buying back in the HL ISA. I basically just add the cash in the ISA from the cash bucket, do matched sells and buys in the accounts and pay myself back with the GIA sale proceeds but I sometimes have spare dividend cash in the ISA to increase a position if I want to. I think HL now do a Bed&ISA service again to save on transaction fees so I can do that in April for some fee savings. Amongst other things I had opened a small experimental position in HFEL IT in the GIA account so sold that and put in ISA and have added to that with dividends. HFEL dividends are nice but a 7% capital loss in the ISA now – I could add more but the position size is enough for now. Also continuing to sell VMID ETF in the GIA and put it in the ISA, a helpful add to capital losses! The HL ISA has ISF+VUKE / VMID ETFs to make a FTSE UK All Share type position for dividends as holding a fund for that blows my £45 HL platform fee. Then there was EasyJet EZJ which I should have got rid of and really should do, not sure why I Bed&ISAed that and didn’t just off it, maybe I though it was on the up and I could flog it later. I was late working out what to do with EZJ before the pandemic hit. I also put a GIA REIT position in API / Aberdeen Property Income trust in the ISA because tax for income from those is a headache to deal with – lesson learned…that is on a significant loss now. REIT holdings like BBOX / API / BCPT in the ISA have not been great in recent times with the capital losses but less than 10% of the ISA at least.
See point 2 at: https://www.iweb-sharedealing.co.uk/help-and-guidance/existing-customer/managing-your-isa.html
I have not used it as yet, hence my Q to Bill
If you read through it iWeb don’t charge dealing commission on the ISA repurchase if you do it by phone, but they do if it is done online. That is really weird! For HL they have started calling Bed and ISA Share Exchange, no dealing charge for the GIA sale but their fees are probably higher than iWeb? https://www.hl.co.uk/shares/share-exchange
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The Italian beer was good – but a bit heavy for a pizza lunch. AFAICT, it is not widely available yet. They make some interesting claims about the heritage of their brewery, see e.g. https://puntoitalian.co.uk/birthplace-of-modern-beer/
Beer is a bit of a hobby of mine and I am familiar with “beersofeurope”. I have been lucky and spent considerable periods of time (paid and unpaid) in both Belgium and Germany.
Thanks for explaining you B&I experiences thus far.
FWIW, I still have “Royce’s” shares, so I know that pain.
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Curiouser and curiouser. Iweb say in their ISA Help
but @Al Cam’s link point 2 belies this claim thusly
Having said that, this is only dealing commission @£5, though don’t say if you get to eat the spread twice, which seems not the case at iii from @Boltt’s experience. Or at HL, it would appear,
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Gold and CGT? Buy sovereigns – they’re CGT-free. Store them cunningly at home or in someone’s vault – perhaps the Royal Mint’s if you want to.
“Britain chose finance over industry, austerity over investment, and a closed economy over openness to the world.”
“Britain chose finance over industry”: an odd remark – who made this choice, then? Probably the none-too-impressed customers of our industries.
“austerity over investment”: utter bollocks, there has been no austerity – the government deficit has always continued to grow during the soi-disant austerity years.
“a closed economy over openness to the world”: the idea that the EU, a protectionist quasi-empire, represented openness to the world is richly comic.
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It is indeed your dire warning that made me initially see if there was a CGT angle on this. At the moment I have, to a first approximation, about the same amount of gold as equities in the GIA, the hope is to shunt out the equites over time into the ISA. Because the gold and equities shift in sort of different directions I hope to use this sort of balancing act for a little while.
However I do take the point that it’s trying to balance two large and probably opposed forces, that can lead to blow-ups, and I may get to rue the day… As the equities start to drop proportionally in the GIA there may be an argument to hold it physically.
I was unable to convince myself at https://www.royalmint.com/gold-price/capital-gains-tax-on-investments/ that I could store coins at the Mint’s vaults, it’s an interesting concept, though with a higher cost of carry and much higher turn thanSGLN if I compare with the CGT-liable Digital Gold bullion service
I’m seriously considering this service from Chards. If they store and later sell gold Britannias for me, I believe I get the CGT advantages, with fairly reasonable charges if I go in big. Plus, it’s physical and owned by me, so no chance of financial counterparty risk. I’d be trusting Chards though! https://www.chards.co.uk/info/storage
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It’s intriguing, and it’s of the same order as Royal Mint’s digital gold (which isn’t coins AFAICS). There’s something appealing about it being non-London, too.
But the cost of carry is eye-watering. Let us take SGLP, which is my current holding again. They run a TER of 0.12% I am still building this stake, the ultimate aim is a Permanent Portfolio holding gold, but say it’s £100k. SGLP will charge me £120, whereas the physical option will set me back £600 as I read it. If we take the difference at £480 as charge that to CGT at 10%, that means I could handle an uplift of £4800, 4.8%.
I do take the point that given inflation is 10% that might be a price well worth paying if gold tracked inflation, but the link is loose and takes time to play out. At the moment I am looking to use the seesaw effect of equities and gold to balance CGT, so I am more looking at it as a financial instrument.
But the aim is to hedge SHTF, then the allure of physical is strong. It’s a pity that you can’t walk into your local bank and get a safety deposit box. Although with £100k gold = 0.088l it may be a bit big for a safety deposit box 😉
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Another possible risk (albeit hopefully rare) I read about earlier this week, see:
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Al Cam’s article about stones in nickel is interesting too. Now, I’m pretty sure the gold held by SGLP is LBMA Good Delivery Bar assayed, but who is looking after it? We just have to hope that the contracted custodian of the metal hasn’t lent out the metal to other parties in order to sweat the asset. If I hold Britannias, minted and certified by the Royal Mint, and they’re allocated to me in a safe near-ish Blackpool, that is a useful diversification maybe. I already have gold vaulted by BullionVault in Zurich, and some SGLN, so some further diversification could be useful in a SHTF moment. Or is a hedge of a hedge bit mad?!
> Or is a hedge of a hedge bit mad?!
Depends what you feel this part of your portfolio is doing for you 😉 It may perform multiple roles. For instance in my case it’s still a CGT swing producer. As time passes it will become more the classic permanent portfolio quadrant, in which I can hold it as either and ETF, or arguably a large lump in legal tender coins to avoid CGT. I am in a better position now to swing the large bonds PacMan into more of a PP proportion than 11 years ago.
I don’t see a difference in an ETF or in something like Bullionvault – same CGT issue (other than in theory you can hold the ETF in an ISA as I did for a while, which I don’t think you can do with physical gold). And same counterparty/trust issue. You pays your money, you takes your counterparty. If I didn’t aim to shuttle between SGLP and SGLN for CGT reasons I would half split my gold holding between them to diversify counterparty/company risk, but that would put the kibosh on the switching opportunity, unless I take a > 30 day break on each half.
It wouldn’t be unreasonable to hold some physical coins and hold some at a Blackpool vault, to handle different degrees of social collapse and/or counterparty risk. At the same time the aggregate can play the financial diversification role of the Permanent Portfolio.
Although I spent too much attention on this is the post GFC I am now too old to fight that sort of this. When you are down to using gold to buy bread and water, I’d say a better bet is guns and ammo, and that’s not a place I want to allocate headspace any more, life is short enough as it is, even if only the paranoid survive 😉
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Another news story on ‘non-conforming’ product, see: https://www.theguardian.com/business/2021/nov/28/bee-aware-do-you-know-what-is-in-that-cheap-jar-of-honey
Re Bed and Isa
I’m with ii and they vaguely mention “only charging for the sale not repurchase” (or vice versa) but importantly they mention trying to minimise bid offer spreads. I chose to do a phone transaction (+£49) to be sure of what the spread was.
Sold at 105 and bought at 105.2p -these usually have a spread of 5%, so I was very happy. Did the same for my wife, and will repeat in a couple of weeks.
Manually selling and buying could have cost nearly £2k
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I’m somewhat envious of your CGT maneuvers with the shiny stuff! I looked at my Bed & ISA already done and the next one planned working out my CGT exposure. Thanks to losses I have most of the current 22/23 CGT allowance left, incompetent investing! That leaves some Vanguard VLS60 Income in the VG GIA account showing a £4k approx gain, it would be more if not for Truss and Co perhaps. Since that takes a significant amount of the CGT allowance under the new £6K CGT regime I’ve just instructed them to swap it to VLS80 and VLS40 income funds 50/50 – a handy trick. I just hope Vanguard do their stuff in a timely manner at this point!
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I’d really like to claim it’s skilful investing but it’s pure dumb luck in the sudden rush up of the gold price about a month before the window closes for this valedictory CGT full allowance. I expect the gold price to fall by a similar amount at some stage, so I regarded it as a way to carry forward some of this full allowance, since you are allowed to roll forward losses year on year.
>”Now if I could fire up the time machine in the garage and slip back to my younger self a bung from my eventual good fortune and whisper in his shell-like “chin up, I am the Ghost of your Future Self, and I come bearing some fur with burnished tips and some gold, because you won’t be able to cash these funny plastic banknotes back in your day. FFS don’t save it, use it to smooth the path of living off NMW. It worked out all right in the long run” then I’d do it. ‘Twas ever thus, eh?”
So true. The number of ‘mistakes’ I have made I am surprised I managed to FIRE at all!
I am in the happy position that I don’t think I will be able to flatten my SIPP before my DB scheme’s NRD of 65, nor diffuse my CGT in any reasonable time frame unless they raise the CGT limit.
Still, I am happy with what I hold in my GIA and like Warren Buffet my preferred holding period is forever. So I don’t fret about CGT really. Also, I can just leave any money I don’t need in my SIPP to snowball, especcially if I take my DB benefit early, as I may do at 60. It’s all going to charity when I pop my clogs anayway, so it makes little difference as I seem to have enough.
Atkinsons Bullion are a very slight bit cheaper than Chards, once you have added on postage. I am pretty sure you could easily fit 60 or so Britannias in the Extra Small box here:
for only £240 pa.
I only have a couple of Brits at the moment, but Metrobank have a big branch in the next town, so will go that route eventually, as I can see the sense in having 5% of my portfolio in gold.
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> so it makes little difference as I seem to have enough.
IMO, it really is all about having enough and having a good feel for what enough is.
Having said that, I reckon we are all different with our own preferences & biases.
FWIW, my overriding objectives (daft though they may seem to others) in this arena were and still are:
a) to not pay any LTA penalty; and
b) to eliminate (as far as practicable) the possibility of ever paying tax again at HRT.
When I pulled the plug six plus years ago I thought a) would be the trickiest to achieve, but it turns out that (even before Hunt’s changes to the LTA) due to “events” and rule changes along the way objective b) became the more tricky. The jury is out on whether I will achieve objective b) and future “events” could easily scupper or possibly enhance my probability of success.
I also believed [at the time I pulled the plug] that I sort of knew what enough might be. On this I was wrong. I spotted the signs fairly early on but put it down to good luck, etc. It has taken me several years to come to accept that error.
You live & learn.
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